New civil unrest is possible in Algeria, one of Europe's major sources of imported gas.
That was apparent in arrival of the Algerian military on the streets of Algiers and other major towns and cities following the resignation of President Chadli Bendjedid and suspension of elections that Islamic fundamentalists looked certain to win.
Algeria is strictly minor league when its comes to crude oil and gas liquids production. Production is about 800,000 b/d before local consumption takes its cut.
But the North African state is a significant supplier of gas by pipeline and LNG tankers to France, Belgium, and Italy. Gas production averages about 35 bcfd of which a little more than 2.9 bcfd goes for export.
MAINTAINING THE FLOW
At this time of year any interruption in deliveries to Europe could have serious repercussions.
The importance of maintaining Algeria's credibility as a gas supplier has not been lost on authorities in Algiers. Judging from experience during previous bouts of fundamentalist inspired unrest, every effort is being made to ensure that gas keeps flowing.
During last summer's riots and labor strikes, LNG exports from Arzew and Skikda gas liquefaction plants continued as normal. Italy reported deliveries through the trans-Mediterranean pipeline were normal.
In June, the Islamic Salvation Front tried to interfere with production by encouraging a strike at one of Sonatrach's main sources of gas, Hassi R'Mel field in the Sahara Desert about 300 miles south of Algiers.
About 10% of the field workforce walked off the job, but a strong contingent of police prevented Salvation Front leaders from visiting Sonatrach facilities to support the strikers. Despite a period of tension, gas production was not affected.
The uncertainty created by political upheavals in Algiers will do nothing to advance Algeria's new policy of encouraging foreign investment in its oil and gas resources. After decades of allowing Sonatrach a monopoly on every aspect of the petroleum industry, Algeria introduced production sharing contracts and recently amended its hydrocarbon laws to stimulate foreign investment.
International companies are investing in a much needed new round of exploration. However, the main objective of the change in the law was to attract western companies' expertise in secondary and tertiary recovery to stem the decline in liquids production.
On present estimates, production will slump to 500,000 b/d by the turn of the century and continue to slide unless technology and finance comes in from abroad.
PRAGMATIC ATTITUDES
Sonatrach's monopoly years also were marked by a degree of managerial and technical incompetence leading to inflated views of the value of gas in international markets that, for a time, damaged the Algeria's long term export prospects.
More pragmatic attitudes now prevail. Until demonstration of the grass roots strength of Islamic fundamentalism, Sonatrach looked set to expand its gas pipeline links with Europe and build its portfolio of customers.
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